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Tuesday, 7 June 2016

RBI hits pause button on rate cuts

The Reserve Bank of India has refrained from lowering policy rates in its second bi-monthly
monetary policy review on Tuesday as it is monitoring the progress of
the monsoon rains for cues over near-term inflationary trend in Asia’s third
biggest economy.

As expected, the central bank retained the
repo rate at 6.5 per cent after cutting it by 25 basis points in its April
meeting. Banks' cash reserve ratio or CRR, the ratio of net demand and time
liabilities kept with RBI, has also been kept static at 4 per cent.

RBI has cut the policy rate by nearly 150
basis points since January 2014 when it stood at 8 per cent.

The RBI’s decision came in against a backdrop
of higher retail inflation in April, prospect of the interest rate hike by the
Fed later this month and on the timely outburst of the monsoons.

The country’s consumer inflation, the RBI’s
benchmark inflation gauge, accelerated to 5.39 per cent in April 2016 from 4.83
per cent in March 2016, leaving lesser room for a further interest rate cut in
the near-term. Despite that, RBI has retained the inflation projection at 5 per
cent announced in the April policy statement, though with an upside bias.

Further, it is hoping that an above-normal monsoon may boost agricultural output
and keep a lid on food prices.

The RBI is also weighing the impact of
heightened global economic uncertainties including the lack of clarity over the
next US Federal Reserve interest rate hike and a possibility of Brexit - events
which may risk capital outflows from the emerging markets.

The central bank warned that while inflation
risks were on the upside, it retained its forecast for India’s GDP growth for the
current financial year at 7.6 per cent.

Going forward, RBI expects demand conditions
to improve as consumer confidence is seen rising on improving expectations of
employment and spending, with rural demand aided by a stronger monsoon.

1 comment:

RBI(Reserve Bank Of India) is the central bank of India and governs all the economic activities of the country. It keeps on modifying its policies timely as per economic condition requirements. For stock market players also it is necessary to check it before and after policy modification effects. For similar updates you can use services of epic research on various platforms online.

LM Insights

Latin Manharlal Group, A Successful & Leading Provider of Financial Services for over two decades. It has become synonymous name with Reliability & Trust for their customers pan India with more than 200 channel partners and catering to more than 35000 clientele.
Latin Manharlal group has evolved itself from mere Equity Broking business to a full fledged Financial Service Provider through its various group companies.